London Gold Market Report

THE PRICE OF GOLD fell sharply against a strong US Dollar on Monday
morning, falling through what one Asian dealer called "technical and psychological
support at $942" to record the lowest Gold
Fix so far this month at $937.50 an ounce.

The "safe haven" flight to US Dollars also pushed crude oil back below $66
per barrel, while base metals and silver lost more than 3%.

Adding to Friday's 0.7% loss despite news that France and Germany crept out
of recession between April and July, world stock markets sank 1.4% early Monday
on average - the biggest one-day loss in more than six weeks - after Japan
reported 0.9% growth in its second-quarter GDP.

Commerzbank reckons the last 6 weeks' uptrend is now "exposed", advising in
its latest note that "a slide back below channel support should be enough to
confirm...the gold market is back under pressure, targeting $925 and then the
$904.80 support."

Ex-Dollar, however, the Gold
Price was little changed early Monday, rising to £575 an ounce
for UK investors and holding above Friday's one-week low against the Euro
at €664.

The European currencies also sank against the Japanese Yen, sliding below ¥154
and ¥133 respectively.

The Nikkei stock index meantime dropped 3.1%, unwinding the last two weeks'
gains.

Gold Prices at the
Japanese Tocom exchange dropped 1.0% to close Monday at ¥2,873 per gram,
a new one-month low.

Latest data from the US Gold
Futures and options market show speculators reducing their bullish bets
on the metal as the price slipped last week.

As a proportion of all hedge-fund and other speculative positions, however,
bullish bets rose to their greatest level since the end of 2007. The volume
of those bets is smaller by more than one tenth.

Bloomberg's weekly survey of professional gold traders and analysts says that
only 13 out of 27 interviewed last Friday expect the Gold
Price to rose this week.

"[Gold's drop] is all
on the back of the Dollar," says Walter de Wet at Standard Bank, speaking to
the newswire today by phone.

"If the Dollar continues to strengthen, it's going to mean lower for the Gold
Price."

"If investors want to benefit from gold's performance regardless of the currency," claims
Stephan Mueller of gold trust-fund promoters Julius Baer, "the logical thing
to do is to neutralize the unwanted currency effect with currency hedging."

European gold owners hedging their currency against the Dollar would also
have incurred extra costs to little end, BullionVault data
show, since the metal has also tripled against Euros, Sterling and Swiss Francs
over the last ten years, more than doubling since this point in 2004.

Swiss private-bank Julius Baer also offers structured products in gold, promising
to return 100% of investors' capital even if the Gold
Price falls.

On Friday the UK's Financial Services Authority said that it's extending a
review of structured products linked to the collapse of Lehman Brothers - a
major player in underwriting such derivative products - after the ombudsman
received 150 complaints from investors in Lehman-backed structured products.

Elsewhere in financial services today, Britain's retail banks need to close
one-in-three of their UK branches or face a 50% drop in return on equity, concludes
a new study by consultancy group Bain.

In the United States, reports AP, retail banks added a "breath-taking" 10,000
branches in the last 5 years, squeezing margins across the setor.

The cost of rescuing savers at the 102 banks that have failed so far since
the credit crunch began in August 2007 now averages 25% of assets, data from
the Federal Deposit Insurance Corpoation (FDIC) shows.

During the last US banking downturn of 1989 to 1995, that figure was 19%,
but "Compared to the savings-and-loan crisis, banks these days have gotten
much bigger and the economy has gotten much bigger," says Bob Patten, analyst
at Morgan Keegan & Co.

Today in Luxembourg, the European Commission approved the German government's €7
billon ($9.9bn) rescue of IKB Deutsche Industriebank AG.

One of the first German banks hit by the banking recession in 2007, IKB failed
due to large losses on structured investment products, Reuters says.

Formerly City correspondent for The Daily Reckoning in London and head of
editorial at the UK's leading financial advisory for private investors, Adrian
Ash is the head of research at BullionVault,
where you can buy gold
today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

About BullionVault

BullionVault is the
secure, low-cost gold and silver exchange for private investors. It enables
you to buy and sell professional-grade bullion at live prices online, storing
your physical property in market-accredited, non-bank vaults in London, New
York and Zurich.

By February 2011, less than six years after launch, more than 21,000 people
from 97 countries used BullionVault,
owning well over 21 tonnes of physical gold (US$940m) and 140 tonnes of physical
silver (US$129m) as their outright property. There is no minimum investment
and users can deal as little as one gram at a time. Each user's unique holding
is proven, each day, by the public reconciliation of client property with formal
bullion-market bar lists.

BullionVault is a
full member of professional trade body the London Bullion Market Association
(LBMA). Its innovative online platform was recognized in 2009 by the UK's prestigious
Queen's Awards for Enterprise. In June 2010, the gold industry's key market-development
body the World Gold Council (www.gold.org)
joined with the internet and technology fund Augmentum Capital, which is backed
by the London listed Rothschild Investment Trust (RIT Capital Partners), in
making an $18.8 million (£12.5m) investment in the business.

Please Note: This article is to inform your thinking, not lead it.
Only you can decide the best place for your money, and any decision you make
will put your money at risk. Information or data included here may have already
been overtaken by events - and must be verified elsewhere - should you choose
to act on it.